Frequently Asked Questions
Who is eligible for the Relief of Tax Liability via Bonded Transfer?
Requires a transfer in bond between independent parties where the transferor has no proprietary interest in the receiver's business.
How does the Relief of Tax Liability via Bonded Transfer work?
Distillers and importers are relieved of tax liability when spirits are transferred in bond to an independent proprietor, provided the transferor divests all interest in the spirits.
What law authorizes the Relief of Tax Liability via Bonded Transfer?
The Relief of Tax Liability via Bonded Transfer is authorized under IRC §5005(c)(2) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §5005
Source: Internal Revenue Code, Title 26, United States Code
§ 5005. Persons liable for tax(a) GeneralThe distiller or importer of distilled spirits shall be liable for the taxes imposed thereon by section 5001(a)(1).
(b) Domestic distilled spirits(1) Liability of persons interested in distillingEvery proprietor or possessor of, and every person in any manner interested in the use of, any still, distilling apparatus, or distillery, shall be jointly and severally liable for the taxes imposed by law on the distilled spirits produced therefrom.
(2) ExceptionA person owning or having the right of control of not more than 10 percent of any class of stock of a corporate proprietor of a distilled spirits plant shall not be deemed to be a person liable for the tax for which such proprietor is liable under the provisions of paragraph (1). This exception shall not apply to an officer or director of such corporate proprietor.
(c) Proprietors of distilled spirits plants(1) Bonded storageEvery person operating bonded premises of a distilled spirits plant shall be liable for the internal revenue tax on all distilled spirits while the distilled spirits are stored on such premises, and on all distilled spirits which are in transit to such premises (from the time of removal from the transferor’s bonded premises) pursuant to application made by him. Such liability for the tax on distilled spirits shall continue until the distilled spirits are transferred or withdrawn from bonded premises as authorized by law, or until such liability for tax is relieved by reason of the provisions of section 5008(a). Nothing in this paragraph shall relieve any person from any liability imposed by subsection (a) or (b).
(2) Transfers in bondWhen distilled spirits are transferred in bond in accordance with the provisions of section 5212, persons liable for the tax on such spirits under subsection (a) or (b), or under any similar prior provisions of internal revenue law, shall be relieved of such liability, if proprietors of transferring and receiving premises are independent of each other and neither has a proprietary interest, directly or indirectly, in the business of the other, and all persons liable for the tax under subsection (a) or (b), or under any similar prior provisions of internal revenue law, have divested themselves of all interest in the spirits so transferred. Such relief from liability shall be effective from the time of removal from the transferor’s bonded premises, or from the time of divestment of interest, whichever is later.
(d) Withdrawals free of taxAll persons liable for the tax under subsection (a) or (b), or under any similar prior provisions of internal revenue law, shall be relieved of such liability as to distilled spirits withdrawn free of tax under the provisions of section 5214(a)(1), (2), (3), (11), or (12), or under section 7510, at the time such spirits are so withdrawn from bonded premises.
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